AIG will pay $13.5 million to settle an investigation involving its alleged sham reinsurance deal with General Re.
American International Group Inc. will pay $13.5 million, including a $6.6 million fine, to the Pennsylvania Insurance Department to settle an investigation into financial misreporting involving its alleged sham reinsurance deal with General Re Corp, according to Crain's Business Insurance.
The settlement, reached March 13, also resolves client-steering and bid-rigging allegations and calls for AIG to provide annual reinsurance reports as well as maintain certain producer compensation disclosure and ongoing compliance initiatives, according to the insurance department.
In a statement released Monday, New York-based AIG said it has already paid $4.4 million of the settlement amount and neither admits nor denies the allegations made by the Pennsylvania Insurance Department.
Last month, five former executives of Gen Re and AIG were convicted of fraud for helping AIG inflate its loss reserves with an allegedly bogus loss portfolio reinsurance deal (BI, March 3).
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Pennsylvania regulators say AIG unlawfully deceived them and other authorities by providing false and misleading information and responses, including misrepresentations involving the loss portfolio deal.
“Financial reporting must be accurate for us to protect insurance consumers and be certain that companies are solvent,” acting Insurance Commissioner Joel Ario said in a statement. “When there is any indication of problems with a company’s financial reporting, we investigate, take action and hold insurers accountable.”
Of the $13.5 million payment, approximately $5.1 million represents reimbursement to the department for its investigations; approximately $1.8 million represents AIG’s underpayment of insurance premium taxes; and $6.6 million represents a fine.
The department said it is working with other states to conduct a comprehensive examination of AIG’s alleged misconduct related to the underreporting of workers compensation premiums.
As part of AIG’s broad $1.64 billion settlement with New York and federal authorities in 2006, more than $300 million went to compensate states for its admitted underpayment of workers comp premiums and residual assessments.
